ACAMS CAMS - Certified Anti-Money Laundering Specialist (CAMS7 the 7th edition)

Residual risk represents the remaining level of risk after considering the effectiveness of controls. Under a risk-based approach, strong controls reduce risk, while weak or ineffective controls increase it.

In this scenario, the inherent risk is assessed as moderate, meaning the underlying exposure is neither low nor extreme. However, the controls are evaluated as less than satisfactory, indicating that existing measures are not adequately mitigating the identified risks.

When controls are weak, residual risk increases above the inherent risk level, as vulnerabilities remain unaddressed. Regulators expect financial institutions to escalate residual risk ratings and implement remediation plans in such cases.

Therefore, the most likely residual risk conclusion is high, reflecting the combination of moderate inherent risk and ineffective controls. This outcome aligns with AML best practice and regulatory expectations.

Beneficial ownership registers maintained by the country of incorporation are the most reliable external source for verifying beneficial ownership during onboarding, as they are official records mandated by law and typically subject to regulatory oversight.

Perpetual KYC (pKYC) involves real-time monitoring of data triggers, such as static changes or behavioral anomalies, and prioritization based on client-specific data rather than fixed refresh schedules. This dynamic approach enhances risk management by responding more quickly to changes in client risk profiles.

Accountants are classified as designated non-financial businesses and professions (DNFBPs) under FATF standards and must apply a risk-based approach to AML/CFT compliance.

A customer acceptance policy is a key tool that helps accountants define which clients or engagements fall outside their risk appetite. This supports consistent onboarding decisions and ensures high-risk clients are either subject to enhanced due diligence or declined.

Additionally, due to the nature of accounting services—such as advisory, tax preparation, and financial reporting—traditional automated transaction monitoring systems used by banks are often not appropriate. Instead, accountants rely more heavily on engagement-based risk assessments, client profiling, and professional judgment.

Accountants are subject to record-keeping requirements longer than two years in most jurisdictions, and geographic risk is always relevant when assessing AML/CFT exposure. Risk assessments must be comprehensive and proportionate, not artificially limited.

The Basel Committee on Banking Supervision (BCBS) is a global standard-setting body that develops prudential banking standards and supervisory guidance, including key principles relevant to AML/CFT governance.

The BCBS does not have legal enforcement authority. Instead, it relies on the commitment of its member jurisdictions to implement its standards through national laws and supervisory practices. This cooperative model reflects the committee’s role as a standard-setter rather than a regulator.

Basel guidance includes international standards, implementation guidelines, and best practices designed to strengthen banking supervision and risk management frameworks globally. These materials are intended to be adopted and adapted within local legal and regulatory systems.

The Basel Core Principles for Effective Banking Supervision explicitly include guidance on customer identification, acceptance, and ongoing monitoring, aligning closely with AML/CFT expectations.

The committee is composed of central banks and supervisory authorities, not individual banks, and there are no formal penalties such as suspension for non-implementation.

In the United States, anti-financial crime responsibilities are divided between specialized authorities. The Financial Crimes Enforcement Network (FinCEN) administers and enforces the Bank Secrecy Act (BSA) and focuses on anti-money laundering and counter-terrorist financing. The Office of Foreign Assets Control (OFAC) administers and enforces US economic and trade sanctions.

In the European Union, the European Commission is responsible for proposing AML/CFT legislation, such as the AML Directives and the AML Regulation. Enforcement is carried out by individual EU member states through national supervisory and law enforcement authorities, with coordination increasingly provided by the EU Anti-Money Laundering Authority (AMLA).

Other bodies such as the EBA and ESMA play supporting supervisory or standard-setting roles but are not the primary sanctions authorities.

D: “Family members and close associates of PEPs are often used as intermediaries to launder the proceeds of corruption or conceal illicit assets.”(CAMS 6th Edition, Enhanced Due Diligence for PEPs; FATF Guidance on PEPs)

Under FinCEN Section 314(b), financial institutions are permitted to share information with other financial institutions about suspected money laundering or terrorist financing activities. This collaboration helps identify and report suspicious transactions while complying with legal safeguards and privacy requirements.

Business entities in offshore financial centers often pose money laundering risks due to limited organizational disclosure and recordkeeping requirements, which can obscure beneficial ownership and make it easier to conceal illicit financial activities.